Article by Barbara Curson, Moneyweb
Mounting evidence of ill-gotten gains surely makes applying the law the easiest way to boost revenue collections.
Another week in the life of the Zondo Commission of Inquiry into allegations of state capture, and more money-for-jam opportunities for the South African Revenue Service (Sars) become apparent.
On Monday, evidence leader Kate Hofmeyr told the commission it would be hearing about the conduct of the Mhlathuze Water Board (MWB) in Richards Bay during 2015 and 2016. At the time, Dudu Myeni was chair of both MWB and South African Airways (SAA).
The investigation carried out by the commission’s legal team has revealed what appears to be an elaborate scheme of looting, in which monies were siphoned out of MWB for the benefit of officials and employees within the water board.
In a related matter, the Free State Development Corporation (FDC) received monies from the state for an RDP housing scheme in Vrede in 2015, with contractors – including an entity named VNA Consulting – paid by FDC.
R2m thank-you for Zuma?
Part of the commission’s investigation is to explore whether there is any link to an alleged R2 million ‘thank you’ paid to former president Jacob Zuma for his role in facilitating the appointment of the contractors.
The first person to testify in relation to these allegations was Dudu Myeni’s son Thalente Myeni, sole proprietor of Premier Attraction 2016 cc, one of the entities providing ‘consultancy’ services to VNA. Premier was paid R2 million by VNA.
Hofmeyr began leading evidence, but Thalente, who claimed to have many businesses, was vague on details. Premier’s consultancy work could have included “planning whether to build one or two stories”, and figuring out “where the pipes had to run”.
And Thalente was not sure if an invoice had ever been issued for the R2 million.
He couldn’t give an idea of the total turnover earned over the years, nor any specifics of the consultancy services or the number of staff hired.
Why didn’t the commission request the Vat invoices, annual financial reports, income tax returns, and IRP5 returns for deductions from payments to staff? Perhaps it did and nothing was forthcoming.
With no aspersions on Thalente, nor any of the players in this convoluted scheme of contractors and sub-contractors, my thoughts turned to the taxation possibilities of illicit activities that would not be included in the data obtained from the relevant taxpayers.
The proceeds of crime are taxable and vatable
A vendor delivering taxable supplies of more than R1 million per annum must register for Vat. Any ‘vendor’ who has received more than R1 million a year for any service rendered (which would include introducing one crook to another) must be registered for Vat, and must pay Vat on all those services (criminal or not). A proper Vat invoice must be issued in accordance with the Vat Act.
If a vendor has received more than R1 million in cash or otherwise and isn’t sure what it was for, or whether an invoice had even been issued, is irrelevant. Sars can raise an estimated assessment.
If a criminal or money launderer has received say R2 million and has paid it over to someone else, the R2 million receipt is taxable. But the R2 million payment is not deductible. The receipt of bribes is taxable. The paying of bribes is not deductible.
Anything received in exchange for a service, even a free holiday, is taxable.
The proceeds of crime are taxable.
The penalty for undeclared income is 200%.
Now that Sars is back on track and desperate to harvest low-hanging fruit before the end of March, one can only hope that it has been following the proceedings of the commission avidly.
This is surely money for jam. Auditors don’t even have to leave their office – they can watch it on their computers.
We should expect Sars to at least have issued lifestyle questionnaires to all those who have appeared before the commission on allegations of having received assets, gifts, livestock (such as a sheep), donations, bags of cash, or of having been given free use of any asset or property.
Sars has no doubt raised income tax assessments, Vat assessments, penalties, and interest on any income that has not been declared or Vat that has not been paid over. Taxpayers are looking forward to hearing about Sars’s successes in the budget speech next week.
The economy may be at a low point, but criminal activity is not.
Sars – open your eyes and look around you.
For the time being, forget your fancy algorithms and pie-in-the-sky data scientists. Forget your penchant for auditing medical aid expenses.
Open your eyes and look around you.
Do some groundwork.
Expand the tax base.
Harvest what is not in the Sars system.
Source: This article was published by Moneyweb.